This paper takes an initial look at early interactions between insurance as a
user industry and vendors of computing equipment during the period from the end
of the war into the mid-1950s, when first generation computers were adopted by
many insurance firms. The transition of life insurance from tabulating to
computing technology illustrates two forces evident at many points of
technological change: co-evolution and continuity. The technology and its use
in life insurance co-evolved, shaping each other in their interactions over the
decade; at the same time, this major user industry and the nascent vendor
industry similarly exerted influence on each other. In addition, relationships
established and choices made during the tabulator era affected events and
choices in the early computer era. In its core technology, the computer may
have marked a point of discontinuity with what came before, but it clearly
demonstrated continuities in many other areas, including market relations, the
punched card as storage and input-output medium, and application areas in
insurance.

While the computer technology that emerged after World War II was
revolutionary in its core technology, from the point of view of
information-intensive commercial users such as firms in the life insurance
industry, it was not a wholly new phenomenon, emerging suddenly and without
precedent, but a generational transition in information or data processing. The
life insurance industry had been a major user of the most direct commercial
predecessor of computers, punched card tabulators, since before the beginning
of the twentieth century.[1] For that
industry, the processing of data was not ancillary to the production of goods:
information was its only product and information processing was the production
line of the firm. Thus it is not surprising that this industry was also one of
the first and largest adopters of computer technology beginning in the 1950s.
It makes an interesting user case study to focus on in exploring the transition
from the tabulator era to the computer era.

By looking at this transition through the lens of a user industry, moreover,
we shift focus from the technology itself to the evolution, appropriation, and
use of that technology. Studies of the advent of computers tend to focus on the
technology itself, and its inventors and vendors, with the user organizations
as minor or even peripheral players, except in studies that focus on the
workers whose jobs are affected by computerization.[2] My focus is, first, on the user firms and
their industry and the ways in which technology constrained and enabled them;
and, second, on the ways in which they influenced the technology and the
industry it spawned. In recent years researchers such as Eric von Hippel in
management of innovation and Ross Thomson and Christine MacLeod in economic
history have highlighted the role of users in shaping technical innovations.[3] Indeed, in earlier work I have shown that
life insurance played a major role in shaping, as well as being shaped by, the
tabulator era of information technology.

Before and during the first generation of computerization, this co-evolution[4] of technology and its use in this industry
continued, although perhaps less intensively. In the mechanical era, for
example, some insurance firms engaged in direct innovation, while at this time,
the added scientific knowledge of electronics and larger scale of R & D
needed to innovate in computers made them less likely to get involved on that
level.[5] Moreover, war and post-war
military and governmental users played a much more significant role in shaping
some of the early core technology.[6] Still,
during this period, individual insurance companies and industry bodies
interacted with vendors directly and indirectly, explaining their needs in
order to influence the development of the hardware, especially the peripherals,
and the medium for input, output, and storage. Again, their need for
large-scale generation of transactional documents more than for actual
computations was influential in shaping the technology and the technology
marketplace. But another form of co-evolution, that between a major user
industry (in this case, insurance) and the vendor industry, was also evidenced
in this period. Here, we see the influence of the tabulator era on the computer
era. The relationships and dependencies of the tabulator era affected the
choices firms in this large user industry made and thus the competitive
dynamics of the early computer industry.

What follows is organized into three main sections. First, I summarize the
interaction between the life insurance industry and the tabulating technology
and industry. Then I discuss some of the earliest post-war interactions between
insurance representatives and the potential vendors of computing equipment,
interactions which shaped both the technology and the life insurance industry's
view of the potential uses of that technology. Finally, I discuss the period of
initial adoption of first generation, vacuum tube computers by insurance
companies in the mid-1950s. The conclusion highlights the themes of
co-evolution of technology and users, and the influence of one generation of
information processing technology on the next.

As I have explored in an earlier paper,[7]
the life insurance industry, as represented by its firms and its industry
organizations, exhibited an early and enduring interest in punched card
tabulating beginning in 1890, the year in which Herman Hollerith's
still-primitive tabulating system was first used to tabulate results of the
U.S. Census. Early tabulating technology included electromechanical or
mechanical equipment for recording structured data on punched cards, sorting
and counting them by fields, and adding amounts in a designated field. The
largest insurance firms, especially, needed a better way to handle their
voluminous (some firms already had over one million policies in force by that
time) and long-held (life insurance policies were often in force for many
decades) records. Thus they were among the very first commercial adopters of
the technology, as well as among the most important user-groups (though by no
means the only one) shaping the technology as it evolved.

Initially, the insurance firms adopted tabulating technology to speed up
manual processes of sorting, counting, and adding numerical data, and directly
and indirectly encouraged developments that improved those functions. Indeed,
in 1895, an actuary for Prudential Life Insurance Company invented the
innovative Gore sorter, which improved on any sorting technology Hollerith had
to offer at that point, and which certainly made clear to Hollerith one area in
which improvements were needed (and may even have given Hollerith ideas for how
to improve it).[8] Moreover, in 1901, in
spite of Hollerith's sporadic marketing efforts, the Actuarial Society of
America chose to use the Prudential's Gore sorter rather than Hollerith
equipment for a multi-company mortality study scheduled for the following year.
These developments and various other market signals by other insurance firms
seemed to put pressure on Hollerith to develop and improve his sorting
technology, and a few months after his rebuff by the Actuarial Society, he
introduced his own sorting device.

Except for actuarial calculations of experience and risk, most insurance
functions ultimately involved less calculation and more creation of documents:
various reports for internal use, and bills, receipts, and policies to go to
external parties. From around 1910 on, through a variety of actions, insurance
firms and industry groups encouraged Hollerith and his competitors in their
development of printing capability. Insurance firms were among the earliest and
most enthusiastic purchasers of the competing Powers printing tabulator when it
came on the market around 1915. Even earlier, Metropolitan Life Insurance
Company, by then the largest insurance firm in the world, contracted with an
independent inventor, J. Royden Peirce, to develop customized printing
tabulator equipment for that firm. Hollerith's successors were forced to play
catch-up, developing printing capabilities by around 1920. With the ability to
print numbers--both lists of the numbers punched into the cards and totals and
subtotals of these numbers--insurance could produce many internal reports, from
actuarial reports to lists of policies managed by a given sales agent.

These early printing tabulators, however, could only manipulate and print
numerical data. By its nature, insurance information included alphabetic items
such as names and addresses. Thus both sorting by and printing alphabetical
items was highly desirable to insurance firms. In the teens and twenties,
insurance users made clear this desire by backing new developments competing
with Hollerith's successor firm.

Metropolitan Life's contracted inventor, Peirce, had a vision for a system
with a master card for each policy that would drive all operations, generate
other cards as needed, and create all documents for the normal handling of that
policy, including producing and addressing bills and receipts for insurance
premiums at regular intervals. He worked on his customized alphabetical
tabulating equipment for over a decade, though his weaknesses in machine
technology and shop management blocked realization of his vision.[9] Meanwhile, the largest British life
insurance firm (the Prudential Assurance Company, unrelated to the American
firm, the Prudential Insurance Company) bought up the British Powers agency and
worked with it to develop alphabetical tabulating and printing capability. This
development, which was soon modified and introduced by Powers in America, once
again gave Powers the edge, and once again Hollerith's successor firm, which
was by 1924 the core of IBM, had to catch up. This time, to provide it with a
patent base on which to compete, it hired Peirce and bought his alphabetical
tabulating patents. By the end of the twenties IBM had caught up with and
surpassed Powers, by then a part of Remington Rand, to stay safely ahead (with
a sales advantage of about eight to one) through the rest of the tabulator
era.

With this new alphabetical power, tabulators could be used to accomplish, and,
in a few cases, to integrate a wider range of insurance functions. Listings of
all policies handled by a specific agent could now be listed by name rather
than by policy number, making weekly at-home collection of premiums for
industrial insurance much easier. For policies billed on a monthly or quarterly
basis, addressing bills by punched cards proved more difficult, since it
involved much more alphabetical information and the ability to print it on
three lines. From 1928 into the 1950s incremental improvements of various sorts
continued, allowing the use of alphabetical printing with a wide array of
continuous forms (often with carbon sets) to achieve a range of internal and
policy-holder documents. By the late 1940s and early 1950s, the vision of
generating, if not all documents relating to a policy, at least the periodic
premium bills for ordinary life insurance had been realized by a small but
increasing number of firms.

While other industries and user groups--including railroads, utilities, state
governments, and the accounting profession--also shaped the development of
tabulating technology, life insurance certainly was shaped by as well as
playing a significant role in shaping, this technology. Thus life insurance use
of tabulating equipment may be said to have co-evolved with tabulating
technology. In addition to shaping technology design and use, the on-going
interaction between this major user industry and the technology vendors shaped
both industries. IBM had reached its dominant advantage over Remington Rand by
responding technically to repeated competitive challenges; by investing in
manufacturing, marketing, and management[10]; and by learning to work closely with
major user industries such as insurance. This earlier era set the stage for the
transition to computing.

Insurance interest in computers, like that in tabulators, started early. Even
before World War II, during which the developments in this area were radically
accelerated by war needs, hints of this interest had appeared. As early as
1936, for example, the Journal of the Institute of Actuaries carried an
article arguing that actuaries should switch from a base-ten system to octal or
binary, in order to allow use of electronics in their calculations.[11] During the war many
mathematically-trained actuaries and other insurance employees worked on
military projects involving early computer developments. After the war, the
life insurance industry grew rapidly and was faced with shortages in clerical
labor and rising costs. Between 1948 and 1953, according to a Bureau of Labor
Statistics study, the number of insurance policies in force (a better measure
of volume of data processing work than value of insurance in force) rose over
24%, and total employment in the life insurance industry grew almost 14%, as
compared to just under 12% for total non-farm employment in the U.S. [12] It also noted that insurance firms had
faced recurrent labor shortages in lower levels of clerical jobs since 1940.
With an already high level of use of pre-computer punched card tabulating
equipment, a growing volume of information to handle, growing labor costs of
information handling, and the exposure of some to the new technology, the
insurance industry's interest in computing developments was not at all
surprising.

Two sets of immediate post-war developments illustrate early interactions
between insurance and developing computer technology, demonstrating the life
insurance industry's interest in and influence on these technological
developments: in 1946, the Prudential's Edmund Berkeley initiated serious
discussions on technical requirements for insurance applications, and in 1948
the Society of Actuaries established a committee to examine insurance
applications of the new technology.

Edmund C. Berkeley joined the Prudential in the Actuarial Department in
1938.[13] As early as 1941 Berkeley, then
Assistant Mathematician for the Prudential Insurance Company, was studying
computing software and hardware and their potential uses in insurance. In a
series of memos and reports to Prudential Assistant Secretary H. J. Volk in
1941-42, Berkeley explored possible applications of symbolic logic to the
Prudential's work.[14] These included, for
example, developing a symbolic algebra to aid in determining the optimal
sequence of tabulating operations and tabulating machine wiring to accomplish a
complicated insurance function. He and a few others from the Prudential,
Metropolitan Life, and Equitable Life Insurance Company, along with
representatives from Bell Telephone Labs and IBM, held occasional meetings in
New York to discuss symbolic logic and its possible applications to punched
card tabulating.[15] This activity was a
predecessor to computer programming, making use of the logic of Boolean algebra
but applying it to the electromechanical processes of punched card tabulating.

During the same period, he was also engaging in discussions with Bell Labs
about its electrical relay computing machine and General Electric about the
"electric network calculating machine" it was experimenting with.[16] His reports from these contacts indicate
that these potential vendors were learning about market needs from him, at the
same time that he was learning more about the technology. For example, in his
report of the visit to General Electric's labs in Schenectady, NY, he
recorded:

The first part of the discussion consisted of an explanation to the General
Electric technicians of the kinds of problems which we were interested in
solving by new machines. ...[T]hese men first wanted to know how we thought
their machines might solve problems for us. I explained that my present purpose
was to search out the correspondence between mechanical operations, abstract
operations, and the operations taking place in an insurance company, with a
view to a variety of applications of machines and abstract systems to insurance
company problems. ...Mr. Kuehni inquired if we would be willing to pay from
$100,000 to $250,000 for the development and production of a new machine. I
said that, depending on clerical and other savings computed on reasonable
assumptions, we would be willing, and that we were now paying an amount of that
order in each year for punched card machines and equipment.[17]

Further discussion centered on specific examples Berkeley provided of insurance
tasks, such as classifying underwriting risks. In the ensuing discussion of
coding and sorting rules, Berkeley pointed out the need, for such applications,
of a machine that handled discontinuous, Boolean algebra, rather than an analog
machine such as GE's electric network calculating machine. So even in this
early period, Berkeley, as a representative of a large potential user base, was
providing market information to possible vendors (in this case, perhaps,
discouraging their entry into that market).

Berkeley spent the period from 1942-46 serving in the Naval Reserves,
stationed for part of that time at Harvard, where he worked with Howard Aiken
on constructing the Mark II automatic sequence controlled calculator.[18] When he returned to Prudential in 1946
as a Methods Analyst, his investigations into new computing technology were an
even greater part of his activities. For example, he reported that from August
1 to December 31, 1946, he engaged in a total of 60 visits with individuals or
groups to discuss applications of the new computing technologies to
insurance.[19] As a result of these
activities, he wrote a series of reports including one entitled "Sequence
Controlled Calculators for the Prudential - Specifications - First Draft,
November, 1946."[20] This report
represents his first of many attempts to formulate and communicate his firm's
needs proactively, rather than waiting for the nascent computer industry to
come up with its own products. Many of his tentative specifications would turn
out to be simple to meet and exceed with the new electronic technology, as will
be seen below, while others would not be met for decades (e.g., his demand for
unattended overnight operation of the machine). This draft illustrates that
Berkeley had complete faith that new "large scale calculating machines" or
"sequence controlled calculators" would soon be introduced into business and
"become indispensable." Significantly, he closed the report with the following
interesting "specification":

There should be close cooperation at all stages between the manufacturer and
the Company [Prudential], in regard to the design and development of the
machine and other features, so as to make the fullest use in the Company of all
applications of devices developed for the machine, etc.

In this passage he revealed the importance he placed on the interaction between
user and technology developer.

Moreover, on December 6, Berkeley ran what he claimed to be the first
insurance problem ever to be run on a sequence controlled calculator, a problem
which involved a complex set of table look-ups and computations to compute the
costs for a change of policy, using the Bell Laboratories general purpose relay
calculator.[21] He went on to explain that
"The purpose of this trial was to prove beyond the shadow of a doubt that a
sequence controlled calculator can easily perform an insurance company
calculation with many successive steps," a goal he achieved.

During the first half of 1947, Berkeley worked on two fronts towards his goal
of having one of the new devices developed for the Prudential: educating those
in insurance about the technology and communicating with potential vendors
about the Prudential's needs. On the educational front, he continued to write
reports and memos educating his superiors in the Organization and Methods
Division and up the corporate hierarchy about the nature of the rapidly
evolving technology and its potential applications to insurance, as well as
possible methods of paying for development.[22] In listing potential insurance
applications for a sequence controlled calculator, he included a wide range
from actuarial problems involving complex calculations but limited outputs to
routine operations with little calculation but lots of input and output, such
as the premium billing process.[23] He also
considered various modes of financing development, from cooperating with other
insurance companies or government agencies to doing it alone, spelling out
advantages and disadvantages of each.[24]

He extended his educational efforts outside of the Prudential into the broader
insurance community via a paper presented to the Society of Actuaries in May,
entitled "Electronic Machinery for Handling Information, and Its Uses in
Insurance."[25] In this paper, he described
what he referred to as "mechanical brains" by analogy to calculators and
punched card tabulators, connected in series, with a pre-set sequence of
operations, and requiring no human movement of information from one to the
next. He asserted that the current cost of such machines, $100,000-$125,000,
was much less than that for a comparable tabulating set-up and its operators,
and described the range of possible insurance applications, from actuarial to
operational. He ended with a sweeping statement calculated to generate
enthusiasm for the new technology:

In conclusion, I think it is safe to say that we are at the threshold of a new
development that will reduce materially the present clerical work going on in
life insurance companies. It will transform the numerical work for many
actuarial calculations, and enable actuaries to do many things they now only
dream of doing.

He mentioned the two key motives that insurance companies would continue to
cite for getting computers: reductions in clerical labor (although, as
discussed below, in the 1950s firms only reduced the growth rate of
clerical labor, not overall numbers of clerical employees) and the ability to
undertake calculations not feasible in the past.

In addition to the educational missions he took on, Berkeley also began
talking seriously to potential vendors about developing a sequence controlled
calculator or computer for the Prudential, soliciting and receiving a series of
proposals responding to his initial draft specifications and conversations.
Engineering Research Associates, Inc. (ERA), for example, proposed that the
Prudential, possibly in conjunction with Metropolitan Life with whom ERA was
also talking, sponsor the development of such a sequence controlled calculator
or a more special purpose insurance calculator. Proposals also came from
Raytheon, Electronic Control Company, soon renamed Eckert-Mauchly Computer
Company (EMCC) and others.[26] Of the
potential vendors, EMCC seemed to lead both in the specificity of its proposal
and in the extent of its relationship with Berkeley. In addition to the
detailed formal proposal, there was on-going informal correspondence between
Berkeley and John Mauchly to discuss details of the proposal.[27] By May 16, Prudential had received a
second proposal from EMCC, taking into account this informal correspondence.[28]

If Berkeley clearly favored EMCC, he even more clearly rejected IBM as a
potential supplier of these new types of machines. In a confidential memo and
notes for a meeting that Berkeley wrote a few days before receiving the second
EMCC proposal, he laid out his objections to IBM.[29] He argued that because of IBM's stake in
current tabulating equipment, "it would be excessively costly to IBM to quickly
introduce more modern machinery using electronics and magnetic tape instead of
relays and punched cards." Indeed, "IBM has a record of long delay (or
suppression) in the introduction of new devices." He criticized IBM
reliability and engineering design as well, specifically pointing to problems
Aiken had experienced with the IBM-built Mark I, causing him to completely
redesign the relays for Mark II. Finally, he noted IBM's policy of secrecy
about new developments until devices were ready for the market. All in all, he
judged that "there is no prospect of modern electronic machinery from IBM
before the next four or five years elapse and probably much longer."[30] While his indictment is damning, a list
of questions and issues he wrote out for himself in preparing for his meeting
with a vice president and other superiors indicated that his superiors were
also considering additional factors, including "possible decline in the value
of our investment in IBM" and "possible pull by IBM at the time we approach the
Board of Directors for authorization." Similar issues probably came up in other
insurance companies, as well, since as very large users of tabulating
equipment, insurance firms had many connections with IBM at all levels, and as
large investors, insurance firms were very likely to hold IBM stock.

To return to EMCC's second proposal, Arthur Norberg has noted that this
proposal demonstrated that "Eckert and Mauchly evaluated the Prudential's tasks
and designed ways that their machine could handle them more efficiently, and
how the machine could be modified to do so."[31] The proposal illustrates the issues where
the Prudential was applying (and would continue to apply) pressure on
developments. In one section, EMCC used a two-column format to display
Berkeley's specifications against EMCC's ability to fulfill them. On most
computational issues, EMCC's specifications already surpassed those proposed by
Berkeley.[32] For example, where Berkeley
required that "The time for reference to the number in any register should not
exceed 20 milliseconds," EMCC stated that access time would be less than 2
milliseconds. (Only in his desire for rapid random access to stored tables did
Berkeley's computational desires exceed what EMCC felt it could easily deliver.
There, the problems of searching sequentially read tape posed problems.)
Berkeley's desires in the area of input and output, however, caused definite
difficulties for EMCC. For example, Berkeley wanted an auxiliary machine for
translating data and instructions into some special medium readable by humans
as well as by machine (he suggested punched paper tape) to allow checking of
input. At this point, Eckert and Mauchly envisioned direct entry of policy
information onto magnetic tape via keytape recorders, and they saw this tape as
the sole storage medium. They noted that magnetic tape was not readable by
humans, but it could be sent through a printer and printed out for checking.
However, the passage went on to suggest:

Proof-reading by visual methods and other methods which involve human scanning
of the entire data for detection of errors are not in general to be
recommended. More efficient methods of detecting and correcting errors can be
devised for use with this equipment.

The input issue arose again in the section on insurance applications. In this
section, Eckert and Mauchly also considered how their machine could handle
three types of problems the Prudential (and other insurance firms) faced: those
involved in premium billing, mortality studies, and group insurance. Of these,
they noted that the premium billing application was the largest, the most
interesting, and the most likely to generate cost savings. Implementing such an
application would, of course, require a large up-front conversion. While they
saw direct entry onto magnetic tape as the probable method of a one-time
conversion, they also noted that the Prudential, which had not yet converted
its premium billing to tabulating equipment, "could start now to convert the
information onto punch cards with IBM or Remington Rand punch machines. The
information on these punched cards could then be converted onto the tape by
readers at a later date." This may have been the beginning of the firm's
realization, which would grow rapidly in the next two years as EMCC interacted
with more commercial firms, particularly insurance companies, that direct entry
and the abandonment of all cards would not come easily. Berkeley was more
accepting of magnetic tape than most others in the insurance industry, but even
he wanted a visible form, as well. As the Society of Actuaries study described
in the next section suggested and subsequent history confirmed, most firms were
loath to give up the visible punched holes on cards for the invisible electric
charges of magnetic tape. Most insurance firms would not abandon cards as a
mainstay of their data operations for almost two decades, and some continued to
use them for limited uses until quite recently.[33] EMCC and its successor, the Univac
Division of Remington Rand, would have to develop card-to-tape and tape-to-card
devices.

A few days after receiving EMCC's second proposal, Berkeley wrote his
superiors recommending that the Prudential inform EMCC of its intent to sign a
development contract with that firm.[34] He
based his support of the proposal on several factors. He argued that "Success
[was] Very Likely," "Saving Very Great," and "Purchase Price Low." In fact, he
claimed, "This whole purchase cost [ignoring a one-time conversion cost] is
less than 1/2 year's annual rent paid to International Business Machines for
the punch card equipment used in the Company." Moreover, adding another
argument against IBM, he argued that such a contract would provide salutary
"Competition for IBM": "At the present time we have a very great dependence on
IBM punch card machinery. A contract with another supplier (1) will decrease
this dependence, and (2) may in addition cause a reduction in costs from IBM."
Such arguments would later be made by some other companies in support of their
decisions to go with computer vendors other than IBM.[35] In addition, Berkeley argued that EMCC
had not only the scientific knowledge to create such a machine, but also the
best "understanding of our problem as a business problem instead of a
scientific problem" of the firms working to develop such machines at that time:
"For example, they alone of our prospective suppliers wished to come and survey
in a day or two our typical problems at no cost to us, saying it would be very
valuable to them to know if their machine could not handle our problems." While
IBM would be better known for its industry-oriented development and marketing
efforts in subsequent years, at this point EMCC was more proactive in its
approach to this representative of what would be a major market segment for the
computer industry.[36]

Berkeley evidently carried his point, for within two weeks, Prudential assured
EMCC that it intended to enter into a contract, and started a series of
negotiations that resulted in a development contract for what would become the
Univac.[37] Berkeley left the Prudential
shortly after this achievement, leaving others to carry on his work, though
none as knowledgeable and committed as he. The contract had a series of
developmental milestones but an option rather than a commitment to buy a
machine after the development phase. Over subsequent months EMCC constantly
missed milestones and renegotiated them with the Prudential.[38] In spite of these delays, in 1948
Prudential signed a contract to purchase a Univac, which was to be delivered in
June of 1950.[39] Interestingly, the
contract included card-to-tape and tape-to-card devices, indicating the
Prudential's decision not to go solely with direct entry to magnetic tape and
forcing EMCC to develop such devices. An earlier report from EMCC to the
Prudential had noted,

It is agreed that it is desirable for Prudential to be able to convert data
stored on punched cards into data stored on magnetic tape, should the UNIVAC
System be installed. It would be inefficient to have any reasonably large
amount of data transferred by means of a human operator and keyboard. The
logical solution therefore is to design and construct a device which will read
the holes punched on the cards, translate this into electrical impulses, and
then record these pulses on magnetic tape.[40]

Delays continued from the purchase contract in 1948 through 1950, when
Remington Rand purchased EMCC. [41] Soon
Remington Rand, recognizing that the Prudential's $150,000 contracted price was
much to low, tried to renegotiate and in 1951, by threatening an expensive and
protracted lawsuit, ultimately succeeded in canceling its contract with
Prudential (and with another early backer, A.C. Nielson),[42] leaving Prudential ready to look
elsewhere.[43]

While Prudential did not ultimately install a Univac, and in fact was not one
of the first insurance firms to computerize, as a later section will indicate,
through the activities of Berkeley it clearly played an important role in early
exploration of applications for computers and conveyance of much information on
insurance applications to the embryonic computer industry. When Berkeley left
the Prudential, he moved out of insurance forever, becoming a major popularizer
of computers. When he was still at the Prudential, he had started the Eastern
Association for Computing Machinery, which became the ACM. In 1949 he published
Giant Brains, or Machines that Think, the first full-length popular
account of computers, and in 1951 founded Computers and Automation, a
major monthly journal in the area.[44] Thus
he is better known for his work with computers than with insurance. Although
Berkeley was quite advanced in his understanding, his early interactions with
computing technology on behalf of the Prudential still illustrate many broader
patterns in the mutual shaping of the two industries.

He demonstrated some of the factors insurance firms would find important in
the decision to obtain computers, what to use them for, and which to obtain.
His early movement away from actuarial and towards large operational
applications was the first instance of a common movement, reflecting his and
the insurance industry's desire to reduce growth in clerical labor. Although
new, previously impossible actuarial calculations were intriguing, that was not
where the largest initial gains lay for the firms. His rare technical
understanding of the operation of the new machines, based on his experience
with the Mark II, gave him an advantage; nevertheless, he, like executives of
other insurance firms, initially thought more about speeding up existing
processes than reconfiguring them totally. And in spite of his well-argued
rejection of IBM as a possible vendor, he was at least forced to deal with the
problems faced by many other firms similarly facing dilemmas of technical
superiority versus long-term institutional relations and interests.

He also served as a good representative of the life insurance industry in some
but not all respects in his efforts to shape the technology. He was more
willing to move directly to magnetic tape than many other insurance executives
would prove to be, but he, too, saw the need for some visible medium to
supplement the invisible magnetization. The Prudential certainly put EMCC on
notice, via the contract to purchase a Univac, of EMCC's need to develop and
make available card-to-tape and tape-to-card converters for those firms that
wanted to hedge their bets and maintain their card files. Moreover, he shifted
the emphasis from internal computation, useful in scientific and defense firms
that had previously been the most important users and potential users, to input
and output devices, forcing EMCC to confront these essentials for insurance and
many other commercial (as opposed to military) uses. He raised, also, the need
for random access to files that would bedevil the systems dependent solely on
sequentially read tape.

Shortly after Berkeley returned from his war-time service to start his studies
of new electronic information technologies, the industry as a whole also
undertook a joint study of the potential of the new equipment on the horizon.[45] In 1948 the Society of Actuaries
constituted a Committee on New Recording Means and Computing Devices, composed
of two representatives of Metropolitan Life Insurance Company (Malvin E.
Davis, Vice-President and Actuary, who served as committee chair; and John J.
Finelli, Assistant Actuary), one from Connecticut Mutual Life Insurance Company
(William P. Barber, Jr.), and one from Equitable Life Assurance Society (Walter
Klem, Vice-President and Associate Actuary).[46] In 1952 this committee presented a report
of its activities and conclusions to the Society of Actuaries and to a Special
Meeting arranged by the society but including some outside vendors or potential
vendors (p. v). This latter meeting included an exhibit of materials and
equipment by IBM, Remington Rand (which by that time had bought up the
financially ailing and poorly managed EMCC) and the U.S. Bureau of Standards,
which had built a one-of-a-kind computer, called SEAC, for the Air Force.[47]

This report, which was produced in written form for distribution, reveals some
of the life insurance industry's interaction with the computing industry and
the early evolution of its thoughts about how insurance might use this new
machinery during this key period before the first computers would actually be
ordered in 1953 and delivered to firms in 1954. As Metropolitan Life's Malvin
Davis, chairman of the committee, explained in his part of the report,

We are not going to build this equipment. There are many manufacturers very
much better qualified to do that. What we can do is to know our job well enough
to be able to tell about it in terms that the manufacturers can use.(p. 25)

Thus this effort, during which they worked closely with at least two of the
firms selling computing machinery (internal evidence indicates that they were
IBM and Remington Rand's Univac Division, though they remain unnamed), educated
both vendors and the insurance community on the possible uses of this new
technology.

In describing why the committee was established, the chairman of the committee
explained why the actuaries undertook this investigation of the new computing
devices that had emerged from the war, and why they chose to do so jointly:

Now one part of the insurance business where more than elementary arithmetic is
applied is in the actuarial part of the business, so naturally actuaries began
to wonder whether such computers could be of assistance to them. How was an
actuary to find out? When he tried to do so, he quickly learned that life
insurance people and electronic engineers were two groups who did not speak
each other's language. He found electronic engineers quite willing and anxious
to have their ability and experience applied to the changes necessary to take
computers out of purely laboratory work and into the business world, but they
were lacking an adequate picture of the kind of facilities the business world
needs. On the other hand, actuaries and others in the life insurance field
were also lacking a sufficient understanding of the type of equipment which it
would be reasonable to expect for insurance use. It became apparent that some
medium was necessary to bridge the gap between the two.

It would obviously be undesirable and unnecessary for each of us who might be
able to make use of such equipment to start from scratch and separately begin
to build up the necessary knowledge; the preferable approach seemed to be
through some joint effort. Accordingly, four years ago the Society of
Actuaries appointed a committee to examine into the new recording means and
computing devices which were becoming available and to report when it felt that
such devices had been developed sufficiently for business use so that life
insurance companies could consider their possible employment. (p. 4)

During the next four years, this committee undertook extensive investigation
both of developments in equipment and in possible applications of that
equipment to life insurance work. At the time of this report, Davis noted,
these machines were no longer

...purely computing machines capable only of a large amount of arithmetic. In
recent years, some very important improvements have converted them into
machines capable of a wide variety of operations. Nowadays we must think of
them as information processing machines with computing representing just
a part of their total capabilities.(p. 5)

Davis's overview of the committee's activities included some simplified
explanations of how some of the new technologies worked, including, for
example, magnetic tape and mercury delay tubes, before turning to its central
topic, insurance applications. The report did not name specific vendors and
tried to avoid favoring one type over another, particularly important because
both IBM and Remington Rand were in the audience. However, after mentioning
that there were 25 to 30 electronic computing machines in existence, mostly of
the punched card type,[48] the explanations
of the technology covered primarily the new elements, especially magnetic tape
as a potential medium. Here, as in Berkeley's studies, they focused on
input-output issues, as well as on the problems of sorting with a sequential
medium such as tape. The input problem clearly seemed best addressed through
card-to-tape converters, available by 1952, rather than by direct entry. The
output issue was more problematic, but they felt it was on its way to a
solution:

Today to convert answers which are in punched card form there exists the
regular line of tabulators which are very rapid printing mechanisms. A
corresponding high speed printing machine to read answers from magnetic tape
does not exist. Magnetic tape information must be converted to readable copy by
a slow one-character-at-a-time typewriter which is actuated by a magnetic tape
reading mechanism and, because of the relatively high printing cost involved
through use of such a machine, it does not appear to be very useful on a large
volume of such work. Higher speed printers operating from tape, however, are in
a very advanced state of development, so much so in fact that for our purposes
we can practically regard them as an accomplished fact. (p. 12)

Sorting was another problem that concerned them, especially since at this point
they still thought in terms of the separable sorting, counting, and calculating
steps of tabulator operations. In fact, they noted that computers using
magnetic tape "are most efficient when the amount of sorting involved is kept
down to a minimum" (p. 12).

After this brief consideration of the technology itself, Davis also summarized
the Committee's considerations of possible insurance uses of the new computers
to explain why the rest of the report focused on a particular application set
(pp. 15-16). Not surprisingly, this committee of actuaries started by
considering computation-intensive actuarial investigations such as mortality
studies and financial analyses. While these applications were attractive to
them and could certainly be handled by the technology, investigation convinced
the committee that such work was not large enough in volume to keep a computer
busy and to make it pay for itself. They then turned to operational
applications, first focusing on the more computational area of policy
settlements (i.e., computing and paying out death settlements), but again
finding that the volume was not high enough and the amount of table storage
needed for the computations was not yet available.

More compelling was the concept of maintaining a large electronic file of
policy information that could be stored compactly, updated electronically, and
used to look up information on any policy. Since large firms had literally
millions of policies, electronic rather than paper or card storage of policy
records could save enormous amounts of space, as well as time. Here the
Committee encountered two main problems. First, the technology at this stage
simply did not support efficient random access to policy information. Searching
would have to be sequential and thus too slow. Furthermore, there were
significant issues concerning the legal standing of such records, especially in
magnetic tape form, to the various state insurance departments and the courts
as the primary records on policies:

For one thing, how do we know, for example, how long it would take for policy
records which are recorded on magnetic tape to be acceptable to the various
Insurance Departments? It has only been within the last few years that some
State Insurance Departments have accepted a printed form of annual statement.
Microfilm copies are still not acceptable in some courts. How acceptable a
completely invisible magnetic tape record would be to the business community at
large certainly is a very important question and one that is not likely to be
resolved in a short time. We concluded, therefore, that regardless of how
excellently magnetic tape might substitute for existing kinds of policy records
we would probably need a visual record of the account with the policyholder
which would be generally accepted by the courts and regulatory bodies--at least
until wide use of tape has become commonplace. (p. 16)

Thus the Committee rejected this application, as well.

Ultimately, like Berkeley, the Committee concluded that the real gains to be
made with electronic computers were in the areas of routine operational
processes, especially premium billing. This task involved computing dividends
and loan payments on policies, as well as sending out notices of premiums due
and statements of values. Thus it focused its attention on figuring out how
best to use computers, of both punched card and magnetic tape varieties, in
such work. The Committee established several principles or "guide posts" for
such computer applications:

1. An electronic computer should be applied to the whole job, not to some
separately departmentalized piece of it. [...]

2. Small jobs should be combined with others. [...]

3. Source records should be consolidated. [...]

4. Make all calculations at one time. [...]

5. Use a self-checking machine. [...] (pp. 22-23)

The first principle was important in its implications for firm structure.
Clerical tasks in high volume operations were quite subdivided, and tabulating
equipment, though itself often in a centralized tabulating department, had in
some ways exacerbated that subdivision, since it handled only one sorting or
counting or adding task at a time. Different departments handled each aspect of
servicing a policy (e.g., policy loan payments, though part of the premium
billing process, were generally handled by a separate department than that
figuring the premiums). The Committee recommended handling such jobs as a
whole, as well as consolidating source records and different small jobs.

The centerpiece of the Committee's work was what it termed the Consolidated
Functions Plan, which was intended to be a general plan applicable to both
card- and tape-based computers, and which was worked out and tested based on
the procedures of one firm (clearly Metropolitan Life). In his section of the
report, John J. Finelli described it as it would work on one small-sized,
card-based computer (which he identified in a later article as the IBM Card
Programmed Calculator[49]) and one
tape-based computer (the Univac). Ironically, while this plan consolidated
several previously separated insurance tasks, as described above, it separated
sorting and output from the actual computing, delegating them to different
machines and, in the case of magnetic tape computers, to different media. In
both cases, input was in the form of two eighty-column cards (one with the
address visibly typed on it, as well), though these were converted to magnetic
tape via a card-to-tape converter for the latter computer. In addition to
retaining punched cards, the plan also included one typed "history card" with a
history of premium payments and other facts. These three cards consolidated
what had previously been 10 different cards or files of various sorts. It is
clear from the description that much of the gain in performance came from this
consolidation of files and processes before the actual "computing," not from
the computer per se.[50]Finelli provided a justification for the Committee's extremely conservative
stance of retaining the humanly readable history cards:

We just do not believe that the time has yet come to completely dispense with
readable card records of this kind, and we do not have to in order to realize
substantial economy with electronic computers. (p. 41)

Moreover, he justified retaining the punched cards even with the magnetic tape
computer by objection to putting processes completely at the mercy of such new
and not always dependable machines:

To avoid to the degree possible a complete dependence on the operating
effectiveness of such complicated equipment, complete compatibility with
punched card systems seems to be an almost essential requirement. (p. 46)

The output procedures for both types of computers were designed to be
independent of the computer itself. For the card-based computer, an innovative
photo-electric scanning system was to be used for printing name and address
information from the address card, saving the addition of two or three more
cards with that information encoded on punched cards. The rest of the
information (amount of premium, any dividends or loan payments, etc.) would be
printed by the high-speed printers used in conjunction with non-electronic
tabulating machines. For the tape-based computer, Finelli noted that current
printing capabilities were quite slow but that high-speed printers are well
along the development process and would soon be available. This development was
undoubtedly spurred by the demands of Berkeley, the Committee, and others in
life insurance and other industries for the better output capabilities needed
by information-intensive businesses, in contrast to the minimal output
capabilities demanded by defense and scientific work.

This insurance industry report highlights several issues in the continuing
interaction between it and the information processing industry. While many
insurance firms awaited off-the-shelf models before actually purchasing a
computer, the industry was not waiting passively. Although Berkeley's actions
might be attributed to idiosyncratic factors, the Society of Actuaries
Committee clearly represented the large players in the industry, who were
determined both to stay informed and to make potential vendors aware of their
interest and needs. EMCC's successor Univac Division of Remington Rand was
exhibiting equipment and probably had representatives sitting in the audience
at the Special Meeting of the Society of Actuaries where the report was
presented. Univac clearly needed to attract some such large business users and
seems to have cooperated fully with the committee to give them information on
the tape-processing machine. IBM had an enormous stake in the insurance
industry and was clearly monitoring the Committee's work and cooperating, even
though its technology was considerably behind at this stage. Both vendors and
others are learning more about the industry's needs, especially for rapid
sorting and high-speed input and output. Many years later, Paul Chinitz, an
individual working with Univac during this period, assessed the importance of
the Society of Actuaries study as follows:

The insurance industry had a forum, early, for the use of large computers.
They had the actuarial society committee studying that for many years so that
the concept and the results of that evaluation spread out on all the insurance
companies. So I think that the concept of the computer as an important [tool]
by the insurance industry was generated from within on that. I rather suspect
that for a large number of other industrial companies, the concept of going to
a computer, or at least investigating the thing, came by an osmosis from the
publicity that was generated not only by the election, but also by major
insurance companies acquiring systems and [using them successfully].[51]

Thus he saw leaders in this industry as taking a proactive role in exploring
computers and their possible uses in insurance, and in spreading the word
throughout that industry and ultimately beyond to industrial companies.

The Society's report also revealed the life insurance industry's progress from
seeing computers as actuarial devices to seeing them as operating workhorses
such as tabulating equipment had been. Further, we see that much of the gain
from the new process the Committee designed came from their reconfiguration of
their own processes; some, but at this stage less, of the gain is attributable
to the new electronic technology. The Committee's work suggested that these
machines were at a stage of being useful and cost-effective for large firms,
and might be shared by smaller and medium sized firms. The Committee did not
use Berkeley's inflated rhetoric of "Giant Brains," but saw them as an
important but incremental improvement in current processes. The Committee was,
if anything, ahead of much of the life insurance industry. It saw the need for
reconfiguring processes or, as Davis put it in one paper, "a basic
reengineering of present procedures"[52] to
take advantage of the equipment, but did so incrementally, not radically. It
was cautious in its estimates of the potential savings from reducing clerical
labor. It anticipated a savings, but only a gradual reduction in the clerical
workforce, usually by attrition. In fact, no actual reduction in headcount
would emerge in the next decade, but a slowing of rapid growth.[53] Finally, it was cautious about any
abandonment of punched cards and even of cards on which facts were typed or
posted by accounting machines. This conservatism would appear frequently in the
early years of insurance computing.

The two industries, life insurance and computers, were carrying on the
interaction described above from just after the war, but the 1950s were pivotal
for turning talk into actual orders for and, starting in 1953, delivery and use
of computers. From that year through to the end of the 1950s, insurance firms
one after another bought their first (and in some instances their second and
third) computers. Initial applications were not always ambitious, but the new
machines were not yet very powerful and much had to be learned about using
them.

The Univac Division of Remington Rand was targeting the business world in
general and the insurance industry in particular in the early 1950s. In 1950,
Remington Rand hosted the "Remington Rand Forum on the use of Electronics in
the Insurance Industry," produced jointly with four different insurance
organizations.[54] This forum included one
set of presentations by the Univac representatives, including John Mauchly
himself, covering the nature of the Univac, how it could be applied to office
procedures in general, how it related to punched card accounting, and most
specifically, how it related to the insurance market. After the computer
industry view came a panel of life insurance representatives, including someone
from the Prudential, which still had a contract with Univac at that time,
discussing that firm's experimentation, and someone from Metropolitan Life,
discussing the application of electronic computers to life insurance, a subject
which it was studying both independently and in conjunction with the Society of
Actuaries study. According to an insurance industry source, this meeting was a
turning point:

It was at this forum meeting that the Univac computer system was first
introduced and its operations explained to representatives of the insurance
industry and the leaders of the various industry associations had an
opportunity to outline their ideas on data processing applications for the
electronic computer in the life, casualty, and fire segments of the insurance
business. The results of this meeting made the industry well aware of things to
come and many of the larger companies organized staff committees to make
feasibility studies with respect to the desirability of using a computer system
for their data processing work.[55]

Because Remington Rand had canceled the Prudential's under-priced contract
for a Univac in 1951, Metropolitan Life was the first insurance company to take
delivery of a Univac. In the spring of 1954, it received the ninth Univac
built, and only the second to go to a commercial company.[56] It was followed in December of that year
by Franklin Life Insurance Company, which received the fifteenth Univac built.
The importance of insurance as a Univac customer is revealed by analysis of
Univac sales in its first few years. The first eight Univacs, delivered from
1951 through 1953, all went to government agencies (e.g., Bureau of the Census
and Army Air Comptroller), universities, and a Univac demonstration and sales
center. In 1954, however, Remington Rand shipped eight Univacs, only two of
which went to government agencies. Of the remaining six, two went to U.S.
Steel, one to DuPont, one to General Electric, and two to life insurance
companies. Insurance firms thus accounted for one quarter of the Univacs
delivered that year. In the following year, two more insurance firms (John
Hancock and Pacific Mutual) bought Univacs, again accounting for one quarter of
Univacs delivered.

A closer look at the first two life insurance firms to buy Univacs reveals
factors in these companies' decisions to computerize, their choices of the
Univac, and their uses of the computer. The two firms contrast sharply on some
of these dimensions, providing a wide range of motives and uses for computers.

Metropolitan Life, as we saw earlier, was central to the activities of the
Society of Actuaries Committee on computing devices. It is particularly
interesting that Metropolitan was so conspicuous in this joint effort and was
the first purchaser of a Univac, since a 1948 EMCC internal memorandum assessed
Metropolitan Life as an unlikely early customer for the Univac. In this memo,
Mauchly described a conversation with the Metropolitan's J. Everett Rowe that
included reference to that firm's independent--and ultimately
counterproductive--development effort with Peirce in the tabulator era:

He said that they were very much interested in the development of electronic
equipment but were not going to spend any money in experimental work or
development. [...] He said that their company once spent one and a quarter
million dollars in the development of special IBM equipment. They paid a man
named Pierce [sic] to do this development, and when it was finished, IBM bought
it out. I gather that Mr. Pierce made something out of this, but that
Metropolitan didn't. Apparently they are not anxious to spend any money on a
project which might appear to their Board of Directors to have any similarity
to this earlier experience. [57]

Although this experience obviously did not stop Metropolitan Life from tracking
and investigating developments in computers and their possible applications,
nor from actually buying the first Univac purchased by any insurance company,
it may have prevented them from engaging in the type of developmental contract
the Prudential made with EMCC. By the time Metropolitan ordered its Univac in
1953, several were already in operation in government agencies and
universities, and Metropolitan had tried one out as part of the Society of
Actuaries study. Moreover, the tabulating experience may have made Metropolitan
Life more interested in cooperating with other firms through the Society of
Actuaries Committee rather than working independently, and it may have been
behind Malvin Davis's insistence, as described in his section of the
Committee's report, that the Committee focus not on speculative, yet to be
developed equipment, but on equipment already available and testable.

Metropolitan Life's motives for buying a computer were simple. First, both its
own accounts and a labor department study note that it had suffered from
intermittent labor shortages since before the war, leaving it chronically
short-staffed.[58] Thus it was interested
in any form of automation that would reduce its large and still growing demand
for clerical labor. Furthermore, as the world's largest life insurance firm, it
certainly had the volume of clerical work necessary to make such equipment pay,
if any insurance firm did. It felt compelled to keep up with such developments
in technology, both through the Society of Actuaries committee and through its
own parallel in-house committee.[59]

Through its work on those committees, it tested both the Univac and IBM's
electronic calculators, clearly seeing the superiority of Univac's technology
at this time. Much later, John J. Finelli, a key member of Metropolitan's
computer study committee, as well as a member of the Society of Actuaries
committee, would claim, with some hyperbole, that "Maybe the biggest push
Metropolitan gave the whole electronic development was the decision to buy the
Univac. It put IBM in motion and you know what a significant force they
became..."[60] In fact, IBM's account
suggests that the push came much earlier, in 1949, with Prudential's Univac
order and the knowledge that Metropolitan Life was talking to other vendors.[61] Nevertheless, Metropolitan's order was an
important one, and by 1956 it had ordered two more machines, providing lots of
publicity and significant impetus to the Univac.

Ironically, Metropolitan Life's actual use of its first Univac was far short
of the Consolidated Functions Plan it had been so instrumental in developing.
It did not even start with the basic premium billing operation, but with the
even more limited actuarial application, rejected towards the beginning of the
Society of Actuaries Committee work. They would use it to compute the
statistics needed for company financial statements and to calculate insurance
experience.[62] Finelli explained the
reasons for this choice as follows:

1. Since the equipment was as yet untried on any commercial application, this
area of work (which embraced primarily the production of business statistics
not directly affecting policyholder service) was one in which delays could be
better tolerated if the machinery did not live up to its early indications.

2. Since this actuarial work was highly mechanized and had recently been
redesigned to make the punched card operation a very efficient one, it would
give the electronic machinery a severe test.

3. Since this actuarial work involved keeping basic cumulative totals on
magnetic tape and adjusting them to reflect current status regularly, it was
felt that this experience would yield a significant indication of some of the
risks involved in committing basic Company records to magnetic tape in
invisible form.

4. Although previous studies had indicated that such equipment could be
gainfully employed in many areas of Company work and that many separate areas
could well be integrated, it seemed necessary to establish the dependability
and effectiveness of the equipment as a matter of fact before embarking on an
extensive program of consolidating existing procedures.

This conservative course still made financial sense as a starting point for
Metropolitan. While actuarial applications were a relatively small part of
total clerical operations in an insurance firm, in one as big as Metropolitan
Life (with 44.5 million policies having a value of $66 billion, Metropolitan
Life was the biggest insurance company and even the biggest financial
institution in the world at this time[63])
this work occupied IBM punched card tabulating equipment that rented for
$225,000 a year.[64] Finelli figured in
advance and reiterated two years into the experiment that the savings in
equipment and clerical labor for this application would pay for the computer in
four years. No layoffs were required: attrition and reassignment easily handled
the displacement of clerical workers.

With this first experience progressing fairly well, Metropolitan Life made
organizational changes and ordered two additional Univacs for other
applications. In 1955, the original Metropolitan Life computer committee (which
had run parallel to that of the Society of Actuaries) gave up control of the
company's Univac to a new Development Division created to handle all aspects of
introducing and establishing computers in other parts of the company, including
installation, procedures, programming, and so on.[65] The programming would be particularly
important, since much computer time during the first year's operation was
devoted to programming work. In 1956, Metropolitan Life also acquired two
additional computers, this time to handle insurance operations. One of them
would handle the premium billing application, and "will later be expanded to
embrace related functions up to the limit of the available machinery."[66] Thus even at this second stage, the full
Consolidated Functions Plan would only be achieved if the computer had adequate
capacity for it.

In contrast to Metropolitan Life, Franklin Life, the second insurance firm to
take delivery of a Univac, was a medium-sized firm with roughly 1% the number
of policies held by Metropolitan.[67] Thus
it seems an unlikely candidate for such early computerization. But when it
ordered its Univac, Franklin Life was in a period of phenomenal growth, having
increased its insurance in force 1100% between 1939 and 1952 (with sales
growing at over five times the industry growth rate). The company continued to
grow, doubling in size between 1952 and 1956. Its management thus felt that the
new technology was necessary to keep up with its demand. Moreover, it felt that
the computer would allow it to delay a major new building expansion.

The relatively small size of Franklin Life, in relation to Metropolitan Life,
both required and allowed it to apply the computer much more innovatively,
consolidating operations well beyond what the Society of Actuaries committee
had recommended:

A general survey indicated that to justify economically the equipment, a
medium-size company -- such as Franklin Life -- would have to use the equipment
for many applications. Included in Franklin's applications are premium billing,
premium accounting, dividend accounting, agency commission accounting, and
valuation of reserves (once annually).[68]

Using the computer, Franklin consolidated twelve separate files of documents
and punched cards, operating from one master file and one address file for each
policy. These files were maintained on magnetic tape, without the punched card
back-ups Metropolitan Life and so many other insurance firms were unwilling to
give up. The consolidation of so many files was enabled by having 240 character
master files for each policy, which would have required three 80-column cards
each.[69] Interestingly, Franklin Life,
like Metropolitan Life, estimated a four-year payback period, though subsequent
savings per year were estimated to be quite high.

This comparison highlights one of the drawbacks faced by the largest
companies: the size of their applications. At this period and later, sheer
quantity of policies in comparison to the size of available machinery and the
time within which a particular application had to be run limited the amount of
creative consolidation these firms could undertake. Moreover, the possibilities
for easy paybacks from simply speeding up individual applications may have
deterred these firms from pursuing more complex "reengineering" of processes to
make the largest gains. Medium-sized firms such as Franklin Life, on the other
hand, had the capacity and flexibility to try more innovative applications of
their computers. This pattern was continued in the initial Univac applications
of Pacific Mutual and John Hancock, the next two insurance firms to receive
Univacs. John Hancock, the fifth largest insurance firm (though only about one
third as large as Metropolitan Life[70])
initially used its Univac for premium billing of ordinary life insurance, which
would become a standard early application for many firms.[71] Pacific Mutual, another mid-sized firm,
which dated its interest in and knowledge about computers from the meeting at
which the Society of Actuaries study was presented, implemented a system
relatively close to the Consolidated Functions Plan presented by the
Committee.[72]

Univac continued to cultivate and work with insurance firms over subsequent
years and subsequent generations of computers, but it was at the height of its
market share among insurance firms in 1954. While in 1955 Pacific Mutual and
John Hancock received their Univacs and others ordered them, a Bureau of Labor
study of computers in the insurance industry which showed 2 computers installed
in 1954 (the 2 Univacs just discussed) showed over 20 installed in 1955, of
which only 2 were Univacs.[73] Moreover, in
the market as a whole, according to one source, IBM was already turning around
Univac's lead by the end of that year.[74]
Univac sales continued, but did not dominate the computer scene in numbers as
they did, at least until the early 1960s, in technical capabilities. In 1956,
for example, Metropolitan Life ordered two more Univacs, and in 1957 New
England Mutual Life ordered its first computer, a Univac II.[75] But meanwhile, IBM was making inroads in
the market. As during the tabulating era, Remington Rand (which became Sperry
Rand in 1955) initially moved ahead in technology but within a few years IBM
caught up and surpassed it. The next section explains some of the factors in
this exchange of competitive positions.

While Eckert and Mauchly led the way in commercial computers, and had
the clear technological advantage during this period, IBM certainly had many
advantages of its own with insurance firms (as well as with other potential
computer customers). First, it had the enormous installed base of its punched
card tabulating equipment, which it was continuing to upgrade, including adding
electronics to some models. Its customers were comfortable with punched cards,
but many were suspicious of magnetic tape. Based on this tabulating equipment,
IBM also had a long-standing relationship with the firms on multiple levels,
from the marketing force's contact with decision makers to the service
personnel's contact with operators and their managers. Moreover, extrapolating
from the Prudential's situation, we may speculate that many insurance firms
probably had investments in IBM stock and some probably had connections at the
Board of Directors level. Moreover, no matter how rapid the computerization of
insurance firms, the reasonably large ones would still need tabulating
equipment for many purposes for many more years. One of Berkeley's memos from
the late 1940s explored the implications for buying another vendor's computer
of Prudential's current tabulating equipment contract with IBM.[76] In it Berkeley noted, for example, that
the contract did not allow the use of IBM equipment for experimental work or
when connected to machines made by other firms, except with explicit
permission. The contract could be canceled for actions such as attaching IBM
peripherals (e.g., high speed printers, which Univac still lacked at that time)
to other vendors' equipment without explicit permission.

Whether for these reasons or out of general conservatism, many insurance firms
were not ready to jump to the Univac by 1954. At the end of that year, IBM
shipped the first of its smaller and less powerful, card input and output, 650
magnetic drum computers.[77] This computer
was announced at a monthly rental of $3250 with 1000 words of memory and $3750
for 2000 words, a much more accessible price than the $1.5 million that
Metropolitan Life spent on its second and third Univacs in 1956.[78] Bashe et al explained its success later
as follows:

It was very competitive, not only in performance and price, but also in its
concept as a small, reliable machine offering the versatility of a
stored-program computer in a punched-card environment. This last consideration
was important to prospective customers whose data processing requirements were
not large enough to justify trading the convenience of the familiar punched
card for the vagaries of magnetic tape.[79]

Indeed, insurance firms enthusiastically embraced this machine. Even large
companies that bought Univacs often expanded their capabilities (and perhaps
protected their standing with IBM) by buying 650s as well. John Hancock, the
fourth insurance purchaser of a Univac, was also the first company (insurance
or otherwise) to take delivery of a 650.[80] A glance through the 1956 program for the
Electronics Session of the Proceedings of the Insurance Accounting and
Statistical Association provides a clear picture of the 650's immediate
popularity in the industry. There were two papers on Univac applications and
seventeen on 650 applications, indicating that much of the insurance industry
was taking the easy and comfortable approach of growing into computing
incrementally with IBM. Similar evidence comes from an early 1959 consultant's
publication on computers in all types of insurance, which lists 7 Univac Is or
IIs and 15 Univac 60s and 120s (evidently a small computer from Univac) in
service in insurance firms, but 57 IBM 650s and 16 IBM 705s.[81]

Even Prudential, the earliest Univac enthusiast, had not burned its bridges
with IBM, and after Remington Rand broke its contract, could easily return to
the fold. On May 29, 1947, just over two weeks after Berkeley's damning
indictment of IBM, and at about the time when Berkeley informed EMCC of
Prudential's intention to negotiate a development contract with that firm,
Berkeley also (perhaps as a price that his superiors exacted for giving him his
way with the EMCC contract) initiated contact with IBM about future
developments. In a memorandum addressed to three high-level IBM officials,
Berkeley explained the Prudential's program to investigate the use of modern
technology and suggested that he was initiating such a discussion with IBM.[82] While Berkeley was not happy with this
discussion, since IBM insisted it would reveal no developments before public
announcements, Prudential continued to work with IBM throughout the period of
the Univac contract, converting its premium billing operation to tabulating
equipment as a step towards eventual conversion to computer.[83] After the break with Univac, Prudential
did not act on the computer front for another two years, but in 1953 when IBM
announced its 702 Tape Processing Machine, a larger machine than the 650,
Prudential placed an order to rent one when they became available, and when the
705 was announced soon after, ordered it, as well.[84]

The decision to go with IBM was much easier than this in some firms.
For example, an automation consultant described the selection of an IBM 650 by
the mid-sized Equitable Life Insurance Company of Iowa as follows:

The data processing equipment of different manufacturers was not compared
because it is company policy to use only one make of equipment, such as one
make of typewriter, one make of adding machine, one make of punched card
equipment. The selection of the IBM 650 was justified on the basis that it
would replace IBM punched card equipment, either installed or on order, with an
approximately equivalent monthly rental.[85]

If choice of vendor was influenced by a pattern established in the tabulator
era, choice of applications was also, at least in part, a continuation of an
earlier pattern. Premium billing operations, either by themselves or
consolidated with other functions such as premium and loan accounting
operations, appeared frequently in early accounts of applications, such as
those of Prudential, John Hancock, Pacific Mutual, and Franklin Life. As late
as 1964, a major industry-wide survey indicated that in the life insurance
business, the most common application area was still premium notice billing,
with premium accounting a close second.[86]
By this time, these and other related applications were more often consolidated
than independent, but the basic transactional operation of billing, just
beginning to be automated at the end of the tabulator era, was still central to
computer applications 15 years later.

Premium billing was by no means the only application during the first few
years of computerization in insurance. As we have seen, Metropolitan Life
started out with an actuarial application. Other firms used computers for
applications such as processing mortgage and policy loans, payroll, agents
commissions, and group insurance policies.[87] As noted above concerning the first
Univac applications, consolidated applications were initially more common in
mid-sized firms than in large ones.[88] In
these early years, however, the applications were almost always either direct
conversions to computers of applications already handled by tabulating
equipment or the combination and consolidation of several such applications.

This paper has briefly surveyed early interactions of insurance as a user
industry with vendors of computing equipment during the period from the end of
the war into the mid-1950s, when first generation computers were adopted by
many insurance firms. The transition of life insurance from tabulating to
computing technology illustrates at least three themes:

During the tabulating and
early computing eras, data processing technology enabled new activities and
uses by insurance firms, including much more rapid handling of existing
processes, the slowing of growth in number of clerical employees and the
consolidation of applications that had long been handled separately,
eliminating much repetition of data and steps. But the development of the
technology was also affected by the uses to which insurance firms wanted to put
it. In particular, insurance firms had greater need for rapid input and output,
including output of millions of transactional documents such as premium bills,
than many scientific and government users. While insurance firms were not the
only users with these needs, they were quite significant as a proportion of
business users. In 1955, for example, a Bureau of Labor study cited insurance
as making up one third of the commercial customers for computers.[89] Large firms such as the Prudential and
Metropolitan Life seem to have pushed Univac's development of high-speed
printing capability. Similarly, insurance significantly influenced the long
survival of cards as a medium for input, output, and storage.

Both the user
industry and the vendor industry were affected by interactions between the two.
The technology and the choices insurance firms made with relation to technology
affected their outcomes and capabilities. In both the 1920s and the 1950s,
however, life insurance was expanding, so the interaction did not typically
affect the survival of insurance firms. But user firms and industry bodies also
shaped, perhaps more critically, vendor firms and industries. Orders from large
firms like the Prudential and Metropolitan Life affected the future especially
of new-comers to the data processing industry such as EMCC, but also of
old-timers such as IBM. While the Prudential did not ultimately purchase a
Univac, its early funding of development, along with that of A.C. Nielson and
the Bureau of Standards, enabled Eckert and Mauchly to survive a critical time
period.

Finally,
we can see that events and choices in the tabulator era affected events and
choices in the early computer era. In its core technology, the computer may
have marked a point of discontinuity with what came before, but it clearly
demonstrated continuities in many other areas. For example, the punched card
as an input, output, and storage medium, along with many peripherals using this
medium, carried over from one generation of information technology to another,
making the transition easier for many firms.

Market relations represent another area of continuity. IBM's close operational
and sometimes financial relations with insurance firms during the tabulator
era--relations which many insurance firms were reluctant to break too rapidly
or completely--bought it time to catch up technologically. Staying with IBM
technology, even if it was less advanced, was in many ways an easier decision
for insurance firms than starting a new relationship with another vendor.
Mistakes made by insurance firms in the earlier period often shaped their
actions in the later period, as well. Metropolitan was determined not to make
the same mistake of pouring money into development that might never pay off.
Thus it waited until it could order an actual product that already existed and
had been tested.

Finally, there was continuity in application areas, as in the case of premium
billing. The trend from single functions to combined functions was beginning in
the late tabulator era with the automation of premium billing (which was
previously composed of several separate functions), and it continued, although
slowly, into the early computer era. In both eras, insurance moved from using
the technology primarily to compute, as in actuarial applications, to using it
to generate the transactional documents (such as premium bills) that enabled
the firm to function.

Of course, there were differences between the two eras, as well, but those are
often noted. This view of the transition to computing from the perspective of
one major user industry highlights some of the underplayed continuities, as
well as the importance of user firms and industries in shaping data processing
technology and the technology vendor industry.

[1] See, for example, Arthur L.
Norberg, "High Technology Calculation in the Early 20th Century: Punched Card
Machinery in Business and Government," Technology and Culture 31 (1990),
753-779; James W. Cortada, in Before the Computer: IBM, NCR, Burroughs,
& Remington Rand & the Industry They Created,
1865-1956 (Princeton, NJ: Princeton University Press, 1993); Martin
Campbell-Kelly "Punched-Card Machinery," in William Aspray, ed., Computing
before Computers (Ames, Iowa, 1990); and JoAnne Yates, "Co-evolution of
Information Processing Technology and Use: Interaction between the Life
Insurance and Tabulating Industries," Sloan School Working Paper #3575-93, CCS
WP#145, forthcoming in Business History Review.

[2]
For focus on inventors, see, for example, Nancy F. Stern, "From ENIAC to
UNIVAC: A Case Study in the History of Technology" (dissertation for SUNY Stony
Brook, August, 1978); for focus on labor, see, for example, U.S. Department of
Labor, Studies of Automatic Technology Number 2, "The Introduction of an
Electronic Computer in a Large Insurance Company" (Bureau of Labor Statitstics:
October 1955). One of the few authors who has paid some attention to the market
for the advent of computers is Cortada, Before the Computer.

[3]
In the current literature on innovation, Eric von Hippel, in The Sources of
Innovation (NY: Oxford University Press, 1988) and other work has
highlighted the role of lead users in innovation. In economic history, Ross
Thomson has studied the "learning by selling" process by which users influence
ongoing technological innovation ["Learning by Selling and Invention: The Case
of the Sewing Machine," Journal of Economic History 47 (June 1987):
433-45; The Path to Mechanized Shoe Production in the United States
(Chapel Hill, NC: North Carolina University Press, 1989)]; and Christine
MacLeod has examined the innovation and diffusion practices of machine makers
and machine users, finding that users played a more important role in
innovation and makers in diffusion ["Strategies for Innovation: The Diffusion
of New Technology in Nineteenth Century British Industry," Economic History
Review 45:2 (1992), pp. 285-307]. Of course, studies of the social
construction of technology have also shifted focus from the individual inventor
to the broader social system influencing innovation, in which users may be
considered one of the relevant social groups [e.g., Wiebe E. Bijker, "The
Social Construction of Bakelite: Toward a Theory of Invention," in Wiebe E.
Bijker, Thomas P. Hughes, and Trevor Pinch, The Social Construction of
Technological Systems (Cambridge, MA: MIT Press, 1987), pp. 159-187.

[4]
As explained in my earlier paper, I do not use co-evolution in
the same biological sense invoked by Edward W. Constant ("On the Diversity and
Co-evolution of Technological Multiples: Steam Turbines and Pelton Water
Wheels," Social Studies of Science 8 (May 1978), 183-210); rather, I use
it to denote the contemporaneous and interacting developments of a technology
and its use, and of the vendor and user industries. In particular, many of the
developments are the conscious actions and reactions of managers, inventors, or
other individuals or groups involved. Since writing this paper, I have
discovered a group of researchers in technology and innovation management who
have recently introduced what seems to be a similar use of the term. See, for
example, Lori Rosenkopf and Michael L. Tushman, "The Co-Evolution of Technology
and Organization," and Joel A.C. Baum and Jitendra V. Singh,
"Organization-Environment Coevolution," both forthcoming in J.A.C. Baum and J.
V. Singh (eds.) Evolutionary Dynamics of Organizations (NY: Oxford
University Press).

[5] This point is made in the context of another technology
and for an earlier period in Paul Israel, From Machine Shop to Industrial
Laboratory: Telegraphy and the Changing Context of American Invention,
1830-1920 (Baltimore: The Johns Hopkins University Press, 1992), p. 3.

[7]This section is summarized from Yates, "Co-evolution of
Information Processing Technology and Use," where each development is
documented in detail.

[8] This device served the Prudential for many years, though
the firm allowed itself to become congealed into use of an incompatible and
static technology for three decades (see Marcie J. Tyre and Wanda J.
Orlikowski, "Windows of Opportunity: Temporal Patterns of Technological
Adaptation in Organizations," forthcoming in Organization Science for
discussion of congealing patterns in technological adaptation).

[9] In any case, his complete customization of hardware to
Metropolitan Life's products and processes at a single point in time would have
made this equipment of questionable value in the long term.

[12] U.S. Department of Labor, Studies of Automatic
Technology Number 2, "The Introduction of an Electronic Computer in a Large
Insurance Company" (Bureau of Labor Statitstics: October 1955). The quote is
from p. 15. Figures are either given or computed from those given in the
report.

[13]Obituary for Edmund Callis Berkeley, Annals of the
History of Computing, 10: 3 (1988), pp. 216-7.

[23] Stern ("From ENIAC to UNIVAC") asserts that changes in
the Geurtin Law requiring the re-computation of life experience tables pushed
Prudential's investigation into computers; Berkeley's papers from this period,
however, do not even mention this application, but focus on a wider range of
applications, especially premium billing.

[24] E. C. Berkeley to H.J. Volk, C.B. Laing, E. F. Cooley,
18 Feb. 1947, "New Machinery to Handle Informatio - Path of Development, Report
No. 3: Paying the Cost of Development," Berkeley Coll. 8:53, CBI. He concludes,
at least initially, that the government has already funded much development,
and that expecting a single manufacturer to finance the rest of the development
will result in slow, uncertain, and costly development. Thus an association of
large potential purchasers of such equipment would be most advantageous.

[25] E.C. Berkeley, "Electronic Machinery for Handling
Information, and Its Uses in Insurance," "presented to the Actuarial Soceity of
America at its Meeting May 8, 1947," in Berkeley Coll. 8:54, CBI.

28 The two-part report is described in a memo from Berkeley to F. B.
Gerhard, C. B. Laing, R. W. Cobb, and E. F. Cooley [24 May 1947, Berkeley
Coll. 8:55, CBI] as having two parts. The first part, my focus here, is
"Application of High Speed Computing Machines to Certain Problems of the
Prudential Life Insurance Company" by Electronic Control Company, 16 May 1947,
located in Accession 1825, Unisys Records, Box 48, in Hagley Museum and
Library, Wilmington, DE [hereafter Unisys 48, Hagley].

[30] While his assessment of the time frame was not far off
(IBM issued its 701 scientific machine in 1953, 6 years later), he was
implicitly assuming that other firms (especially EMCC) would develop
commercially available machines more rapidly than they did. It was, in fact, at
least that long before any computers were available for other than government
or university use.

[31] Arthur L. Norberg, "New Engineering Companies and the
Evolution of the United States Computer Industry," Business and Economic
History, 22: 1 (Fall 1993), p. 186.

[32] Stern states that Prudential was not initially
interested in a general purpose high-speed central processor--only in
high-speed input and output equipment. With the added materials provided by the
CBI's Berkeley Collection, we can see that this is a misreading of Prudential's
position. Berkeley was clearly interested in a general purpose central
processor, as we can see from his specifications. Realistically, however, he
knew that for the type of work insurance needed, having processing speeds that
greatly exceeded input-output speeds was useless. To apply a computer to the
transactional aspects of the insurance business, such as premium billing,
required millions of very short sets of computations or manipulations followed
by output of an almost equal number of documents.

[33]Oral history interview with Ed Kelley of IBM Marketing,
conducted by JoAnne Yates and Bob Hancke, August 6, 1993.

[35]For example, Henry Roberts, of Connecticut General
Insurance Company, described the need for competition to IBM as one of the
factors behind its move to RCA in the early 1960s. Oral history interview of
Henry Roberts by Herbert Kramer, 1981, CIGNA archives.

[36]Of course, this proactive approach may have been
undertaken more for its marketing value than out of a substantive desire to
change their product.

[37] There were significant contract drafts starting 9 June
1947, and by 5 August 1947 a contract dated 4 August had been signed. This is
in the form of a letter from J.W. Mauchly to J. Presper Eckart, Jr., to the
Prudential Insurance Company, in Berkeley Coll. 3:56, CBI.

[42]Stern, pp. 297-299. The development money was, of
course, refunded.

[43]Interestingly, during 1951 EMCC, then a Division of
Remington Rand, produced a pamphlet detailing a study conducted jointly with
Prudential on "Premium Billing and Dividend and Commission Calculation," in
which they detailed a consolidated application similar to that of the
Consolidated Functions Plan. (Doc. #5109825, Smithsonian Air and Space Museum
Archives. Prudential also claimed later to have done a trial run of the premium
billing application on the Univac in that year.

[45] Interestingly, Berkeley never became involved in this
effort, though it is not clear why. Perhaps he felt that his own specialized
knowledge from his war-time experience put him too far ahead of the others for
him to benefit from it. Alternatively, perhaps the fact that he was by this
time not in the Actuarial Department but in the Organization and Methods
Division may have left him uninformed about this effort.

This committee was not the only industry effort at this time, but it is the
best documented. The Life Office Management Association also established such a
committee during the same period. In general, this industry tended to be very
open in sharing information on computing technology. Many joint efforts emerged
during this era.

[46] Malvin E. Davis, William P. Barber, Jr., John J.
Finelli, and Walter Klem, "Report of Committee on New Recording Means and
Computing Devices," Society of Actuaries, September 1952. Unless otherwise
indicated, all quotations in this section come from this report, with page
numbers given in parentheses in the text.

[47]Charles and Ray Eames ("By the Office of ..."), A
Computer Perspective: Background to the Computer Age (Cambridge, MA:
Harvard University Press, 1990), p. 159.

[48] He may be including in this number machines such as the
IBM type 604 Electronic Calculating Punches, which were just one step above the
types 402 and 403 electric models and cannot be considered computers, in spite
of a storage capacity of 50 positions. For a description of this device, see
Metropolitan Life's in-house methods publication, Ways and Means, 4:4
(August 1948), p.2, Metropolitan Life Archives.

[49]J.J. Finelli, "A Report on the Electronic Activities of
a Large Life Insurance Company," Transactions of the 15th International
Congress of Actuaries (1957), pp. 13-14. The Committee worked out the
procedures for the much larger IBM Selective Sequence Electronic Calculator
first, but then found that the results from the smaller and less expensive
electronic punched card calculator, the CPC, were nearly as good.

[52]M.E. Davis, "The Use of Electronic Data Processing
Systems in the Life Insurance Business," Proceedings of the Eastern Joint
Computer Conference, Dec. 8-10, 1953 (NY: The Institute of Radio Engineers,
Inc., 1953), p. 17.

[53] The growth rate for office staff (who comprise 70-75%
of all insurance employees) declined from 4.2% to 2.4% a year in computerized
companies between 1954 and 1964, according to a Labor Department study. Because
of high business growth, the overall growth rate of employment in insurance
during this decade was 32%. United States Department of Labor, Bureau of Labor
Statistics, Bulletin No. 1468, "Impact of Office Automation in the Insurance
Industry," (U.S. Government Printing Office, 1966), pp. 5, 2.

[83] Prudential's ordinary premium billing operation is
described in H.W. Schrimpf and C.W. Compton to E.C. Berkeley, 23 May 1947,
Berkeley 8:58, CBI. (Ordinary insurance, not the Prudential's biggest line,
consists of relatively large policies on monthly, quarterly, or yearly billing
cycles; in contrast, its large industrial insurance line, consisting of small
policies for which premiums were collected door-to-door weekly, was already
handled in part by tabulating equipment.) A July 1964 article in a Prudential
in-house magazine records that ordinary premium billing was converted to punch
card system in the late 1940s.See also Business Week,

[84] James A. Daley, "Conversion to and Installation of IBM
705 Systems at the Prudential," Proceedings of the Insurance Accounting and
Statistical Association, 1958, pp. 365-66..

[88] See also, for example, the observations of a British
insurance manager on the difference between computer applications in larger and
smaller U.S. insurance firms: "The larger ones have been quite happy as a first
step to secure significant cost savings on individual large-volume jobs and to
think about integrating them in the future, while the smaller companies, who
have been forced to use large and fast machines in order to compete with their
larger bretheren have had to go further in unifying their procedures in order
to justify the cost of the large machines." R. G. Jecks, "Computers in
Insurance," Computer Bulletin 6 (March 1963), p.114.

[89]"The Introductions of an Electronic Computer in
a Large Insurance Company," Studies of Automatic Technology No. 2 (U.S.
Department of Labor, Bureau of Labor Statistics, October 1955), p. ii.